DStv’s admission to price fixing could reveal a major media industry cartel

26 May 2017

PBM

DStv Media Sales has admitted to price fixing and the fixing of trading conditions in a case that could develop into a major scandal with political implications for South Africa’s mainstream media industry.

Fixing of advertising prices and trading conditions in the mainstream media industry can amount to a major transformation hump and by some logic becomes political and ideological censorship. Thus, if Dstv’s is one of many in a cartel this becomes a human rights issue.

Emerging black media operations are most likely the worst affected by the practice admitted by Dstv. Attracting advertising revenue for a new media operation becomes impossible in an environment where a group of established operators, represented by like minded people, seat around the table to arrange kick backs, otherwise known as rebates or discounts.

A statement released by the Competition Commission yesterday said Dstv’s admission forms part of a consent agreement concluded between Dstv and the Commission.

The agreement comes with a host of penalties for Dstv which adds up to an accumulative remedy of R180m.

South Africa’s mainstream newspapers titles in a shop stall

The Commission’s statement said the matter relates to a November 2011 investigation which found that, through the Media Credit Co-Ordinators (MCC), various media companies agreed to offer similar discounts and payment terms to advertising agencies that place advertisements with MCC members.

MCC accredited agencies were offered a 16.5% discount for payments made within 45 days of the statement date, while non-members were offered 15%.

The Commission found that the practices restricted competition among the competing companies as they did not independently determine an element of a price in the form of discount or trading terms. This amounts to price fixing and the fixing of trading conditions in contravention of the Competition Act, said the Commission.

They agreed to pay an administrative penalty amounting to R22.2 million .

The company will also pay R8 million to the Economic Development Fund over three years, to enable the development of black owned small media or advertising agencies requiring assistance with start-up capital and to assist black students requiring bursaries to study media or advertising, among others. This will be managed by the Media Development and Diversity Agency (MDDA) and audited annually.

DStv Media Sales has further agreed to provide 25% in bonus airtime for every Rand of airtime bought by qualifying small agencies. This aims to help smaller agencies participate in the market. The bonus airtime will be provided for a period of three years and is subject to a total annual airtime cap of R50 million.

The big questions are: how wide spread is this practice and who else in the MCC circle is implicated?

MCC is described in its website as a member based Section 21, not for profit, company designed to perform a function akin to that of a credit bureau.

The language used by the commission does suggest that DStv may not be alone in this fixing practice. And the remedies it proposes suggest that transformation and development of smaller was hampered. This is one competition case which politicians in the ruling party will ride.